The Bank of England is under renewed pressure to raise interest rates next month after wages jumped more than expected in June, boosted by a one-off payment to NHS workers.
A rise in borrowing costs is likely even though the latest figures for the labour market also showed employers had begun to shed workers in response to a slowdown in economic activity.
Total pay, including bonuses, rose by 8.2% a year in the three months to June, the Office for National Statistics reported, stronger than the 7.3% analysts expected.
Regular pay, which does not include bonus payments, rose by 7.8% in the quarter, the highest regular annual growth rate since comparable records began in 2001, up from 7.5% in March-May.
The number of redundancies increased and the unemployment rate rose three percentage points to 4.2% in the quarter, the ONS said.
Policymakers at the Bank of England pushed the cost of borrowing to 5.25% earlier this month, the 14th consecutive interest rate rise. They are expected to raise rates again in September to 5.5%.
The City consultancy Capital Economics said the accelerating wage growth supports the case for one more rate increase from the Bank of England.
Public sector pay increased by only 6.2%, lifted by a deal with the government in April.
Under pressure to give a larger pay raise for NHS workers than the offer across all public sector bodies, the government gave health staff a 5% rise and a one-off bonus worth up to 8.2%.
Tuesday’s labour market report will be followed by the latest inflation data on Wednesday, which is expected to show prices rose at a slower annual rate in July. Inflation is tipped to fall to about 6.8%, down from 7.9% in the year to June.
Both pieces of data will influence whether the Bank raises interest rates again at its next meeting in September.
Labour’s shadow work and pensions minister, Jonathan Ashworth, said millions of workers continued to suffer falls in incomes once inflation was taken into account.
“Families are struggling to get by, there are record numbers of people out of work due to long-term sickness, and the employment rate for over-50s is still below pre-pandemic levels – yet Tory ministers have no solutions to get people back to work. The consequence is thousands written off and a rising benefit bill.”
The chancellor, Jeremy Hunt, said a record number of workers in permanent employment showed the resilience of the labour market, adding that the 4.2% unemployment rate remained low by historical standards.
“Thanks to the action we’ve taken in the jobs market, it’s great to see a record number of employees.
“Our ambitious reforms will make work pay and help even more people into work – including by expanding free childcare next year – helping to deliver on our priority to grow the economy.”